What TV can learn from the move to digital music

By January 13, 2009Music, TV, Video

Last week I wrote that the latest online video stats show that longform content is doing well, and in response Alan Patrick pointed me to a presentation on his blog entitled The Future of Online Video – Emerging Hypotheses which contained the following chart:

It is a great presentation overall (if you like this brief version Alan tells me the longer version will go on sale soon) and I was particularly struck by chart above and the way it sets out the logical sequence of events.  Looking at the history of the music industry I think you can see a similar pattern of development – but perhaps five years ahead.

Later in the presentation that this slide is drawn from Alan characterises the current situation in TV as “old order being crushed by the free economics of the pirate services”.  That was the situation in music maybe 5-8 years ago, and more recently the pirates have been crushed in a pincer movement between legal pressure on the one side (with the closure of Napster in July 2001 probably marking the beginning of the end) and the increasing availability of what Alan would characterise as legal new order services on the other side.

The last twelve months has seen a slew of ‘new order’ music services achieving some decent success – in no particular order I would list Spotify, We7, Nokia Comes With Music, Imeem and Myspace, and then there is of course iTunes which last week broke definitively with the old order by announcing they would now stock DRM free tracks from all four major labels.

Timing is everything in venture capital and startupland.  The key to success is setting up your business in time to be ready to ride the wave of growth in your chosen industry. 

So I like this chart for what it tells us about how we should time investment into the online video space.  And remember being too early is often as bad as being too late.

  • Alan – I think things probably will come in more quickly with video, for the reasons you list and because the movie studios are keen to learn from the mistakes of the record labels. That said I think the rush of services that are emerging at the moment are creating a bit of a dogs dinner that will be hard for the consumer to navigate – so they are not the end game.

  • Thanks for the write up Nic – we think video (mainly due to the rate of bandwidth increase) is several years behind audio, but it will probably see some similar patterns.

    One thing that will change the time available that the “pirate world” has for dominance in the video world is The Crunch, which has reduced the speculative funding available for “Freeconomic” plays. Also, video is intrinsically more expensive to operate, so needs deeper pockets – thus it is harder for the “Web 2.0” free-for-all-to-gain-traction bootstraps to sustain.

    In fact, with iPlayer, Hulu et al and YouTube's radical shift in strategy over the last 4 months, the New Order is emerging rather more rapidly than in music.

  • great research. Indeed it gave me some idea about online marketing.

  • Hi Nick
    I agree its a good chart not just for the VC world but also for the Old Order industry guys to get the understand what is happening. At We7 2008 became the year of Old Order acceptance to change, that is why we saw so many announcements in the music industry in Q4 2008 as deals that had been 'held back' began to flow.

    2009 is now about execution and more importantly consumer acceptance as they transition towards the new order. At We7 by making music easier to play find and share than the pirate world we are beginning to see great traction and I think that story will become the common theme during 2009. Any of your readers can appreciate it by just coming to We7.com and Search Click and Play their favourite music – No registration, No restrictions just free music that gets paid for.

    CEO We7

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